ACQUISITIONS AND DISPOSITIONS

12 Months Ended

Oct. 31, 2021

ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS AND DISPOSITIONS

4. ACQUISITIONS AND DISPOSITIONS

Pending Acquisitions

In August 2021, the company and Hitachi Construction Machinery Co., Ltd. (Hitachi) entered into a Joint Venture Dissolution Agreement (Dissolution Agreement) pursuant to which the parties agreed to voluntarily terminate (Termination) the joint venture agreement dated May 16, 1988 between the company and Hitachi. The joint venture agreement governs the terms of the joint venture between the company and Hitachi for the manufacture and distribution of excavators in North, Central, and South America under the John Deere and Hitachi trademarks and

tradenames. In connection with the Termination, the company will purchase all of Hitachi’s shares in the relevant joint venture manufacturing entities located in Kernersville, North Carolina, U.S.; Langley, British Columbia, Canada; and Indaiatuba, Brazil. The company will receive certain intellectual property rights relating to certain manufacturing processes under a perpetual license agreement. The initial cash consideration consists of $275 million for the shares and an intellectual property license. The cash consideration will be offset by cash acquired and the settlement of intercompany balances. The company will also assume substantially all liabilities and debt of the joint venture entities. In addition to the foregoing payments, Hitachi will pay the book value of certain pre-existing inventory. Following the Termination, the company will purchase John Deere-branded excavators, components, and service parts from Hitachi under a new supply agreement with a duration that ranges from 5 to 30 years. The company will also continue to manufacture 10-50 metric ton John Deere-branded excavators. The Termination is expected to close during the first half of fiscal year 2022, subject to the receipt of certain required regulatory approvals and satisfaction of certain other customary closing conditions. The company expects to fund the initial consideration and the transaction expenses from cash on hand.

Acquisitions

Bear Flag

In August 2021, the company acquired Bear Flag Robotics, Inc. (Bear Flag) to further accelerate Deere’s development and delivery of advanced technology. Bear Flag’s technology is complementary to other Deere technology efforts and enables autonomous tractor operations. The total cash purchase price before final adjustments, net of cash acquired of $4 million, was $225 million, with an additional $25 million to be recognized as compensation expense over the four-year post-acquisition service period. In addition to the cash purchase price, $19 million of liabilities were assumed. The preliminary asset and liability fair values at the acquisition date in millions of dollars follow:

	August 2021
Property and equipment	$	1
Goodwill		189
Other intangible assets		54
Total assets	$	244
Accounts payable and accrued expenses	$	1
Deferred income taxes		18
Total liabilities	$	19

The identified intangible was related to technology with a seven-year amortization period. The goodwill will not be deductible for tax purposes.

Unimil

In September 2020, the company acquired Unimil, a leading Brazilian company in the after-sales service parts business for sugarcane harvesters, which is based in Piracicaba, Brazil. The total cash purchase price, net of cash acquired of $5 million, was $66 million, with $6 million funded to an escrow to secure certain indemnity obligations. In addition to the cash purchase price, $14 million of liabilities were assumed. The asset and liability fair values at the acquisition date in millions of dollars follow:

	September 2020
Trade accounts and notes receivable	$	5
Other receivables		2
Inventories		10
Property and equipment		22
Goodwill		28
Other intangible assets		13
Total assets	$	80
Accounts payable and accrued expenses	$	5
Deferred income taxes		9
Total liabilities	$	14

The identified intangibles were primarily related to customer relationships, trade name, and a non-compete agreement. The weighted-average amortization period is approximately nine years. The goodwill is not deductible for tax purposes.

For the acquisitions, the goodwill was the result of future cash flows and related fair value exceeding the fair value of the identified assets and liabilities. The results of these operations have been included in the company’s consolidated financial statements in the production and precision agriculture operating segment and the pro forma results of operations as if these acquisitions had occurred at the beginning of the current or comparative fiscal year would not differ significantly from the reported results.

Dispositions

In September 2020, the company sold its German lawn mower business. At the time of the sale, total assets were $26 million, which were recorded in “Other assets,” and total liabilities were $5 million, which were recorded in “Accounts payable and accrued expenses.” No cash proceeds were received, resulting in a loss on sale, including transaction costs, of $24 million pretax and after-tax. The loss was recorded with a pretax and after-tax accrual recognized in the third quarter of 2020 when a definitive sale agreement was finalized. The loss was recorded in “Other operating expenses” in the small agriculture and turf segment.

In October 2019, the company sold its construction and forestry retail locations in Canada. At the time of the sale, total assets were $187 million consisting of inventory of $138 million, property and equipment – net of $24 million, other assets of $3 million, and goodwill of $22 million. The liabilities consisted of $10 million of accounts payable and accrued expenses. In addition, the company accrued $15 million for transaction expenses and related costs. The total proceeds from the sale were approximately $187 million, with $93 million received in 2019. The remaining sales price was due based on standard payment terms of new equipment sales to independent dealers and separately negotiated terms ranging from 12 months to five years. A pretax loss of approximately $5 million was recorded in “Other operating expenses” in the construction and forestry segment.

For the retail location disposition, the company sells equipment, service parts, and provides other services to the purchaser as an independent dealer.